Why We Need a Green Standard for Natural Gas


Why We Need a Green Standard for Natural Gas

A few weeks ago, while on vacation far from concerns of my energy and utility clients, I was pretty near Heaven… looking out over willows and prairie, enjoying a Snake River Lager, and taking in a gorgeous Teton sunset in Wyoming. It had just rained, and the air was sweet and fresh.

About the last on my mind was smog.

Ozone alerts? This is rural Wyoming, not Los Angeles. But as the sun set over Jackson Hole that evening, my host Matt told me about his recent experience working in the oil and gas business. "It's definitely getting better, as far as the environment goes."

He said there was hardly any regulation when he started twenty years ago. Now more and more operators he works for are using a "closed cycle" approach: reusing their drilling and fracking fluids. "But even then, we're seeing ozone alerts -- from all the trucks bringing in the water."

More than 25,000 new wells are fractured in the U.S. every year. A single well is serviced by 320-1,440 truck trips [PDF] over its lifetime to bring in fresh water and haul away waste. That's a recipe for a serious traffic jam.

As others (including my GreenOrder colleagues) have noted, traffic jams are just the tip of the iceberg when it comes to environmental risks from natural gas. It can take 7 million gallons of water to frack a single well and at least 30 percent of that water is lost forever, trapped deep in the shale.  During the well completion process, fracturing fluids, water, and reservoir gas come to the surface. This mixture includes a high volume of smog-causing volatile organic compounds (VOCs) as well as other air toxics. Newly fractured natural gas wells are the source of around 500,000 tons of VOC emissions [PDF] each year.

But the upside from gas, including from vast shale gas reserves, is potentially huge. There are 60.6 trillion cubic feet of shale gas reserves in the U.S. These reserves could reduce U.S. CO2 emissions by 2,363.4 million metric tons if it replaced fuel burned by coal-fired power plants*. Shale gas could also provide significant national security benefits if we use the gas for transportation, offsetting our dependence on imported oil.

For a utility CEO, either providing gas or using it as a fuel, the environmental risk is a business risk, plain and simple. Non-profits and the media are busy ensuring that utility customers understand the risks of fracking. Voices of concerns are echoing in the state capitols too.

Utility members of the American Gas Association (AGA) are exposed, especially given regulatory variation across states and vulnerability of the whole market to the sins of a few. While this may not be a big concern in oil patch states, it definitely is around the Marcellus. Add in the potential for other San Bruno-type disasters, given fragile gas distribution systems, and you have a fairly urgent situation from their perspective.

What's the answer? Both non-profits and AGA members would like consistent, strong federal regulation that requires sound practices of all gas producers, but that's not going to happen soon enough.

The time is right for a multi-stakeholder process to set up a strong a voluntary standard.

Good news: this system doesn't need to be cut from whole cloth. There's a very successful model that's already working in other energy markets. It's called Green-e, the system that guarantees a unit of renewable energy bought actually corresponds exactly to a unit generated. Let's call the natural gas version Green-T (for Green Therm).

What is Green-e? Green-e is the nation's leading independent consumer protection program for the sale of renewable energy and greenhouse gas reductions in the retail market. Green-e offers certification and verification of renewable energy and greenhouse gas mitigation products.

Has Green-e succeeded? Green-e has had a hockey stick growth curve of electric power sold under its certification that would make a VC salivate -- if this were a for-profit cleantech play. Total retail sales of Green-e certified renewable energy exceeded 18 million MWh in 2009 [PDF], an increase of 43 percent from 2008.

Companies like SC Johnson and Office Depot have turned to Green-e certification to ensure the integrity of their renewable energy purchases. According to Scott Johnson, SC Johnson's VP of global environmental and safety actions, "Participating in the Green-e consumer labeling program means that in addition to enjoying the effectiveness of [SC Johnson products], consumers will feel good knowing they are buying products that are made with renewable energy." 

Major developers like AES, and giant project financiers like GE Energy Financial Services, have cited Green-e as a crucial factor in growing renewable energy markets in the U.S.

How big could Green-T be? There is every reason to believe that Green-T would enjoy the same enthusiastic reception that renewable energy has gotten in the market. Green-e is meeting just a small part of this broader demand for renewables.

EPA's Green Power Partnership works with hundreds of leading organizations to simplify and support the purchase of green power. The Partnership's Fortune 500 members alone are buying more than 8.8 billion kilowatt-hours of green power every year, the equivalent of eliminating the annual CO2 emissions from the electricity used by more than 760,000 American homes.

Major companies like Kohl's Department Stores, Whole Foods Market, HSBC Bank, and AMD are currently purchasing 100 percent of their power through the program. As a first-mover in this space, Green-T has the potential to grab a huge market share by meeting the demand for cleaner natural gas.

How would Green-T work? Like Green-e, Green-T would be a certification system ensuring that certain units of gas were "green," produced according to defined standards and clearly differentiated from other gas not proven to adhere to these standards.

Green-T would be run by a mission-driven, non-profit organization. It would have an independent governance board, standards and policies developed through open stakeholder collaborations, and rigorous verification. The staff would include high performing technical people as well as marketers to help members best leverage the value of the certified green gas.

Also like Green-e, Green-T would help generate value for participants through a logo for marketing purposes. Utilities could use the logo in bills, other customer communication, and marketing materials to communicate they their gas was extracted and transported following best environmental practices. Commercial and industrial gas users could use the logo to tell customers that their operations are fueled by "green therms" and their products are produced with environmentally sound energy.

How would Green-T's standards be developed? Bringing together diverse stakeholders will yield the most robust framework for Green-T standards. An experienced facilitator would convene and run a group of representative key stakeholders including NGOs, gas utilities, C&I customers, and responsible leaders among the gas producers.

Success will require this to be a CEO-led effort, with one or two CEOs actively driving the group's formation. A lot is at stake, and the decisions will be above staffer's pay grade.

Green-T is a win all around for gas companies, utilities, non-profits, and customers. Instead of being at loggerheads, Green-T would provide a space for nonprofits and gas companies to collaborate on the best way to tap natural gas reserves in an environmentally responsible way.

And in the absence of regulatory action, a rigorous, independent standard would offer much-need needed clarity to all stakeholders. The only missing part of the equation is an executive or group of executives who is ready to step up and provide the necessary vision.

* Footnote: 60.6 trillion cubic feet of shale gas reserves is equivalent to 60,600,000,000 MMBtu. Burning that fuel at a natural gas power plant would result in 3,272,400,000 metric tons of CO2, while burning the equivalent amount of fuel at a coal-fired power plant would result in 5,635,800,000 metric tons of CO2 (EPA, eGRID2010 year 2007 plant and aggregation files). Total CO2 savings: 2,363.4 million metric tons of CO2.

Photo CC-licensed by sirdle.